Government-backed saving provider National Savings and Investments (NS&I) has launched its new Junior cash Isa today, but is it the best rate on the market?
The online-only account, which allows you to save £4,128 a year tax-free, can be opened for any child aged 0-17. It pays 2% a year and can be opened with just a £1 deposit.
If you have money in a Child Trust Fund and/or other Junior Isas, you can transfer the funds without charge. You can’t hold a Child Trust Fund and Junior Isa at the same time.
The best Junior Isa rates
Junior Isa rates currently on offer range from 1.35% to 3.25%, from a mixture of high-street banks and smaller, regional building societies. As the table below shows, the best deal is on offer from Coventry Building Society. You can order an application pack online, but the account can only be managed in branch or over the phone.
Danske Bank only offers accounts to people in Northern Ireland and Darlington Building Society pays 3%.
|Provider||AER||Access||Minimum deposit||Transfers in?|
|Coventry BS||3.25%||Branch, phone||£1||Yes|
|Danske Bank||3.00%||Branch, online||£25||Yes|
|Darlington BS||3.00%||Branch, post||£1||Yes|
|Nationwide||3.00%||Branch, online, post||£1||Yes|
|Tesco Bank||3.00%||Branch, online, post||£1||Yes|
NS&I says the Junior Isa can be topped up by third parties if you want to make the most of the annual allowances, so grandparents and friends can contribute throughout the year at birthdays or anniversaries.
Find out more: the best rates for Junior Cash Isas
NS&I Children’s Bonds are no more
As NS&I launches one account, another has closed. It also announced that its Children’s Bond wouldn’t be accepting new applications from September 2017.
Those who hold Children’s Bonds with NS&I can keep them until they mature, typically five years from when they were bought.
How much can you earn in NS&I’s Junior Isa?
If you were to save £340 a month (almost the maximum allowance) into the Junior Isa from birth through to 18, you’d be able to build up a nest-egg of £88,302.
However, as you’re potentially tying up your money for up for 17 years it might be worth considering a stocks and shares Isa, which could pay a better return than cash over the long term – although your money may go up or down as stocks rise or fall.
When can my child access the money?
Your child won’t be able to withdraw any money from the account until they turn 18.
If you don’t want your child to take control of the account when they turn 18, you may want to consider a children’s savings account which allow you to withdraw money when you want, giving you more security and flexibility when your child turns 18.
They tend to pay a higher interest of around 4%, but the interest you earn is liable for tax. Most providers limit savings to £100 a month.
When your child reaches 16, they’ll also be able to open their own cash Isa, in addition to holding a Junior Isa, meaning that their Isa allowance will be a huge £24,128 for two years.
Find out more: Best ways to save for children